Business and Development Sector Reports

India GDP Growth estimates 2012 – 2013

The Central  Statistical Office  (CSO)  has  released  revised  estimates  of  GDP  for  Q4  FY12  and  annual estimates for the fiscal year FY12.

There has been a downward revision in India’s GDP growth rate, from 6.9% (advance estimates) to 6.5% (revised estimates) in FY12, consequent on muted performance in manufacturing and the services segment of hotels, transport and communication.

Annual Estimates – India GDP growth in FY2012

Overall GDP growth in India has slowed down from 8.4% in FY11 to 6.5% in FY12, with growth in mining being negative and growth in manufacturing being as low as 2.5% in FY12 (as against 7.6% in FY11)

2012 gdp

Drag downs

  • Agriculture has registered considerable decline in growth from 7.0% in FY11 to 2.8% in FY12. This may be treated as a high base effect rather than dismal growth as foodgrain production has been robust, touching record highs, owing to favourable monsoons in FY11 (especially, after the drought of 2009-10).
  • The negative growth registered in the Mining and Quarrying sector is a signal towards need for policy reforms in this sector. This is particularly driven by lower production activity in the coal and crude oil segments.
  • Manufacturing has clearly showed signs of deceleration in FY12, with IIP moderating to 2.8% in FY12, as against a high of 8.2% in the previous year.
  • The  interest-rate  sensitive  sector  of  financing,  insurance,  real  estate  and  business  services  has registered a decline in growth from 10.4% in FY11 to 9.6% in FY12, as a result of monetary tightening in most part of FY12.

Quarterly Estimates – GDP growth in Q4 FY12

GDP growth in India has moderated throughout the year, starting from 8.0% in Q1 FY12 to 5.3% now in the last quarter. Growth in manufacturing has registered the worst performance in Q4 FY12 with negative growth of 0.3%. The high-interest rate regime prevailing this year has crowded-out private investment, by making borrowings for working capital expensive, thereby negatively impacting productive activity. Simultaneously, elevated commodity prices  have  caused  input  costs  to  rise  substantially;  causing  bottom-lines  in the  manufacturing  segment  to diminish.

growth 2012

Prospects for FY13

We expect growth in the agricultural and services sectors to maintain their growth trends in FY13 as well. Assuming a growth of 2% in the agricultural sector and 9% growth in the services sector, a minimal growth of 6.0% would be required in industry in FY13. This would result in an overall GDP growth of around 7.0% in FY13

This would presumably, be achievable, in case manufacturing activity picks up during the year. Given an expectation of a 50-100 bps reduction in key policy rates during the year and inflation settling at around 7.0% by end-March 2013, production activity could revive on the back of higher capital investments and lower production costs.

In an adverse scenario, if growth in manufacturing remains subdued, ceteris paribus, overall GDP growth could register a drop to below 6.5% in FY13.

gdp trends 2013


This report is prepared by the Economics Division of Credit Analysis & Research Limited [CARE]. CARE has taken utmost care to ensure accuracy and objectivity while developing this report based on information available in public domain. However, neither the a ccuracy nor completeness of information contained in this report is guaranteed. CARE is not responsible for any errors or omissions in analysis/inferences/views or for results obtained from the use of information contained in this report and especially states that CARE (including all divisions) has no financial liability whatsoever to the user of this report.

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